Garmin 2002 Annual Report Download - page 30

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Comparison of Fiscal Years Ended December 28, 2002 and December 29, 2001
Net Sales
Net sales increased $96.0 million, or 26.0%, to $465.1 million for fiscal year ended December 28, 2002, from $369.1 million for
fiscal year ended December 29, 2001. The increase during fiscal 2002 was primarily due to the introduction of 22 new products
and overall demand for our consumer products. Sales from our consumer products accounted for 75.4% of net revenues for fiscal
2002 compared to 71.3% during fiscal 2001. Sales from our aviation products accounted for 24.6% of net revenues for fiscal 2002
compared to 28.7% during fiscal 2001. Total consumer and aviation units sold increased 17.0% to 1,557,000 in 2002 from
1,331,000 in 2001. In general, management believes that continuous innovation and the introduction of new products are
essential for future revenue growth.
Net sales for the consumer segment increased $87.3 million, or 33.2%, to $350.7 million for fiscal 2002 from $263.4 million for
fiscal 2001. The increase was primarily due to the introduction of 18 new consumer products and overall demand for our
consumer products as total units sold were up 17.1%. It is management’s belief that the continued demand for the Company’s
consumer products is due to the emergence of the GPS market in general, and overall increased consumer awareness of the
capabilities and applications of GPS.
Net sales for the aviation segment increased $8.7 million, or 8.2%, to $114.5 million for fiscal 2002 from $105.8 million for fiscal
2001. The increase for fiscal 2002 was primarily due to the introduction of four new products, increased penetration into the
OEM market, and significant reductions of the restrictions placed on general aviation following the events of September 11,
2001. While Temporary Flight Restrictions (TFRs) continue to impact general aviation, the flying community is adapting to these
changes and returning to the skies in greater numbers. Should the Federal Aviation Administration (FAA) impose more
restrictions, or elect to shutdown U.S. airspace in the future, these factors could have a material adverse effect on our business.
Gross Profit
Gross profit increased $56.9 million, or 28.7%, to $255.1 million for fiscal year 2002 from $198.2 million in fiscal year 2001. The
increase is primarily attributed to the introduction of 22 new products and overall demand for our consumer products. Gross
profit as a percentage of net revenues improved to 54.8% in 2002 from 53.7% in 2001. The improvement in gross margin was
primarily due to the introduction of new higher margin products, improved manufacturing efficiencies on many of the new
products introduced throughout the year, and a reduction of material costs.
Gross profit for the consumer segment increased $52.0 million, or 39.3%, to $184.5 million for fiscal 2002 from $132.5 million in
fiscal 2001. The increase is primarily attributed to the introduction of 18 new consumer products and overall demand for our
consumer products. Gross profit as a percentage of net revenues for the consumer segment improved significantly to 52.6% for
2002 when compared to 50.3% for 2001.
Gross profit for the aviation segment increased $4.9 million, or 7.4%, to $70.5 million for fiscal 2002 from $65.6 million for fiscal
2001. The increase in gross profit is primarily due to the increase in revenues associated with the introduction of four new
aviation products, increased penetration into the OEM market, and a return to less restricted airspace for general aviation
aircraft. Gross profit as a percentage of net revenues decreased slightly to 61.6% in 2002 from 62.1% in 2001. This decrease as a
percentage of net revenues for the aviation segment is primarily attributed to product mix as we experienced a 19.4% increase
in lower margin panel mount unit sales during 2002 when compared to 2001.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $6.7 million, or 17.4%, to $45.5 million (9.8% of net revenues) for fiscal
2002 from $38.7 million (10.5% of net revenues) for fiscal 2001. Selling, general and administrative expenses increased $6.1
million, or 21.0%, in the consumer segment and increased $0.6 million, or 6.7% in the aviation segment. The increase in expense
was primarily attributable to increases in employment generally across the organization (net increase of 146 employees),
increased advertising costs (up 13.3%) associated primarily with new product releases, additional staffing in the customer call
center, and increases in insurance premiums. Overall, selling, general and administrative expenses increased at a lower rate than
revenues due to strong demand for newly introduced and existing consumer products. Management expects its selling, general
and administrative expenses to increase approximately 12-15% during fiscal 2003 on an absolute dollar basis due to the
anticipated introduction of new products for 2003.
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